Are members of the New York State Deferred Compensation Board covered by the State for legal defense and indemnification if they get sued?

Plain-English summary

The New York State Deferred Compensation Board administers a deferred compensation plan for State employees. Its members are appointed by the Governor, Senate Temporary President, and Assembly Speaker. The Board's administrative officer asked the AG whether members are entitled to defense and indemnification under Public Officers Law § 17.

The AG said yes. Section 17 provides defense and indemnification to State "employees" for acts or omissions in performing public employment duties. Its definition includes a person holding a position by election, appointment, or employment in State service, whether compensated or not. The question was whether Board members fit that definition.

The Board's legal status was central. The AG said public benefit corporations are separate from the State and their directors and employees do not receive § 17 protection without express statutory authority. It found the Board was not such a corporation or another entity separate from the State.

The AG ran through the public benefit corporation indicators and found none. General Construction Law § 66 defines public corporations as municipal, district, or public benefit. The Board is none of those. A public benefit corporation under § 66(4) is one "organized to construct or operate a public improvement," and the Board does not fit. The Legislature has expressly designated other entities as public benefit corporations (the various Public Authorities Law and Arts and Cultural Affairs Law citations); it has not done so for the Deferred Compensation Board.

Other indicators support State service: the Board was created to administer a deferred compensation plan for State employees, receives funding from a State purposes appropriation, and uses staff from the Governor's Office of Employee Relations and the Legislature as needed.

So Board members are "in the service of the State" and § 17 applies. A footnote says members seeking defense and indemnification must comply with § 17(4)'s procedural requirements; the opinion does not detail those procedures.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Why does the public benefit corporation classification matter?

The AG noted that public benefit corporations are separate from the State and that their directors and employees lack § 17 protection absent express statutory authority. The Board was neither designated as a public benefit corporation nor within that statutory definition.

What does Public Officers Law § 17 actually cover?

The opinion states that § 17 provides defense and indemnification to State employees for acts or omissions committed in performing their public employment duties. It does not analyze particular claims, exclusions, or the handling of a lawsuit.

What about Board members who are also State employees?

The opinion says Board members who are also State employees receive no Board compensation but are reimbursed for actual Board expenses. Its conclusion concerns their service as Board members; it does not analyze a claim arising from another position.

What if the Board approves an investment that goes wrong?

The opinion does not analyze a failed investment, misconduct, or any particular claim. It concludes that Board members are State employees entitled to defense and indemnification under § 17, subject to § 17(4)'s procedures.

Do the Board's outside contractors get § 17 coverage?

The AG was told that independent contractors supplied the Board's legal, administrative, and financial services. The opinion decides whether Board members are covered; it does not decide the contractors' eligibility for § 17 protection.

Background and statutory framework

Public Officers Law § 17 defines the State employees eligible for defense and indemnification. The AG applied that definition to the Board's members.

State Finance Law § 5 establishes the Board and describes its role in the deferred compensation plan for State employees. The opinion also cites L 1982, ch 547, § 9(b) for Board member compensation and reimbursement.

The AG contrasted the Board's statute with laws expressly designating other entities as public benefit corporations. That distinction mattered because public benefit corporations are separate from the State.

Citations

• Public Officers Law § 17 (defense and indemnification of State employees).
• Public Officers Law § 17(1)(a) (broad "employee" definition).
• Public Officers Law § 17(4) (procedural requirements for invoking § 17).
• General Construction Law § 66 (definitions of public corporations).
• State Finance Law § 5 (Deferred Compensation Board establishment).
• State Finance Law § 5(1) (Board membership).
• State Finance Law § 5(2) (Board purpose).
• Laws of 1982, ch 547, § 9(b) (Board member compensation).
• Public Authorities Law §§ 152, 202, 552, 577, 1045-c, 1677, 1852, 2433 (entities expressly designated as public benefit corporations; cited for contrast).
• Arts and Cultural Affairs Law § 55.05 (entity designation example).
• Racing, Pari-Mutuel Wagering and Breeding Law §§ 245, 253, 431 (entity designations).
• New York State Chapter, Inc. v New York State Thruway Authority, 88 NY2d 56 (1996) (public benefit corporations legally separate from State).
• Op Atty Gen No. 89-F13 (PBC directors not entitled to § 17 absent express authorization).
• Op Atty Gen No. 88-F10 (entity classification analysis).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/99-F4_pw.pdf

Original opinion text

ARTS AND CULTURAL AFFAIRS LAW § 55.05; GENERAL CONSTRUCTION LAW
§ 66; PUBLIC AUTHORITIES LAW §§ 152, 202, 552, 577, 1045-c, 1677, 1852, 2433; PUBLIC OFFICERS LAW § 17; RACING, PARI-MUTUEL WAGERING AND BREEDING LAW §§ 245, 253, 431; STATE FINANCE LAW
§ 5; L 1982, CH 547, § 9(b).
Members of the New York State Deferred Compensation Board are in the service of the State in managing the deferred compensation plan on behalf of State employees and, therefore, are "employees" entitled to defense and indemnification under Public Officers Law § 17. August 4, 1999

Mr. Paul D. Shatsoff
Administrative Officer
NYS Deferred Compensation Board
2 Empire State Plaza
Suite 1201
Albany, New York 12223-1250

Formal Opinion
No. 99-F4

Dear Mr. Shatsoff:
You have requested our opinion regarding whether members of the New York State Deferred Compensation Board (the "Board") are entitled to defense and indemnification under Public Officers Law
§ 17.
Section 17 of the Public Officers Law provides for the defense and indemnification of State "employees" for acts or omissions committed in the performance of their public employment duties. The term "employee" is defined as "any person holding a position by election, appointment or employment in the service of the state . . . whether or not compensated." Public Officers Law
§ 17(1)(a). Therefore, entitlement of members of the Board to defense and indemnification under Public Officers Law § 17 requires a determination of the status of the Board. The Board derives its identity from section 5 of the State Finance Law. Section 5 provides, in pertinent part, as follows: The deferred compensation board is hereby established, to consist of one member appointed by the governor, one member appointed by the temporary president of the senate and one member appointed by the speaker of the assembly. The board shall adopt rules and regulations regarding the standards and requirements of all deferred compensation plans established pursuant to this section, including selection of financial organizations for investment purposes. State Finance Law § 5(1). The Board was formed for the express purpose of establishing and administering a deferred compensation plan for State employees. State Finance Law § 5(2). Board members who are also State employees receive no compensation for service on the Board, but receive reimbursement for actual expenses incurred in the performance of Board duties. L 1982, ch 547, § 9(b). Board members who are not State employees receive a per-diem payment for services in addition to reimbursement for actual expenses. Id. Funding for services and expenses of Board members is provided by an appropriation in the State budget out of the general fund, State purposes account. Executive Budget, April 1, 1998-March 31, 1999, p 434. You have informed us that the Board has no paid staff and that all services, including legal, administrative and financial, are provided by independent contractors. Additionally, the Board uses staff from the Governor's Office of Employee Relations, the Senate and the Assembly when needed for Board purposes. The Legislature has not characterized the Board as a particular type of legal entity. Although the Board was not expressly established as part of a State department or agency, it also was not designated as a public corporation. A "public corporation" is a municipal corporation, a district corporation, or a public benefit corporation. General Construction Law
§ 66(1). Clearly, the Board is not a municipal corporation or a district corporation. Id., § 66(2), (3). A public benefit corporation is a "corporation organized to construct or operate a public improvement." General Construction Law § 66(4). A public benefit corporation is legally separate from the State. The Board does not fall within the definition of a public benefit corporation. Also, the Legislature has expressly designated entities as "public benefit corporations." See, Public Authorities Law §§ 152, 202, 552, 577, 1045-c. No such designation is made for the Board. It is our opinion that the Board is not an independent entity separate and apart from the State and that Board members are "in the service of the state." Consistent with State and federal law, the Board provides a service to State employees constituting a part of their terms and conditions of employment. Provision of this benefit to State employees is service to the State within the meaning of Public Officers Law § 17. Another indicia of State service is the appropriation in the State budget out of the general fund, State purposes account. Additionally, the Board's enabling legislation, which does not establish the Board as an entity separate from the State (see, Op Atty Gen No. 89-F13 and Op Atty Gen No. 88-F10), is in contrast to, for example, Arts and Cultural Affairs Law § 55.05; Public Authorities Law §§ 152, 1677, 1852, 2433; Racing, Pari-Mutuel Wagering and Breeding Law §§ 245, 253, 431, which designate various boards and other entities performing a public service as "public benefit corporations." Thus, the Board was created for the express purpose of establishing and administering a deferred compensation plan for State employees, is funded by the State purposes account of the State budget and is not designated by the Legislature as, or otherwise within the definition of, a public benefit corporation or other public corporation. We conclude that members of the New York State Deferred Compensation Board are in the service of the State in managing the deferred compensation plan on behalf of State employees and, therefore, are "employees" entitled to defense and indemnification under Public Officers Law § 17.

The proposed 1999 budget seeks an appropriation of $150,000 for “services and expenses of the deferred compensation board undertaken pursuant to the deferred compensation board's responsibilities under § 5 of the State Finance Law.” 1999 New York State Senate Bill No. 1602.

Public benefit corporations are separate and distinct from New York State. New York State Chapter, Inc. v New York State Thruway Authority, 88 NY2d 56, 74 (1996). In the absence of express statutory authority, their directors and employees are not entitled to defense and indemnification under section 17. Op Atty Gen No. 89-F13.

We note that Board members seeking defense and indemnification by the State must comply with the procedural requirements of section 17(4) of the Public Officers Law.

Very truly yours,

ELIOT SPITZER
Attorney General